Economics Homework Help

this is important homework and I expect full mark. please read the instruction carefully.

This means a Word document, Excel spread sheet or hand written you will be deducted for using any Excel macros involving present worth, annual worth, err, irr, etc.You can use macros like a random number generator, solver, normal table, etc.To simplify grading please highlight your answer in the Excel sheet (Different color and bigger font)

1. You own an old wave runner (small boat for one or two people).If the wave runner is in working order, then you can sell it for $2,000 with very little effort.Last month the steering chassis broke and it cost $1,000 to fix.Last weekend you were out on a lake and had to paddle the wave runner back to shore.You blew the motor and it will cost $1,500 to replace the motor.Should you get the wave runner fixed and why?

1. Using formulas and the tables in the book, determine the present worth, annual worth and future worth of the following investment strategy.Invest $1,500 dollars today and invest $50 for every month for the next 5 years.Assume that the annual nominal interest is 6%, which is compounded monthly. Please write down all relative formulas.Use the table values, do not use Excel.However, put the answer in an Excel sheet.Only use the table values uploaded to the course.

(i.e.Present worth = 300*(P/A,.02,4) + 1000 (P/F,.02,4) +10000)

• You get a starting job offer with a company.The salary is $60,000. The company offers one of two options.A fixed $2,000 raise each year or a 2.5% raise a year.How many years do you have to stay with the company to make the 2.5% increase better than the consistent $2,000 raise.You consider your interest rate to be inflation at 2%.
• A. Done in excel.In January 2018, I refinanced my home for $279,000 in a 5 year arm at 3.125.Surprisingly, I was able to convince the bank to give me a 25 year loan. Currently, I owe $235,000.I am debating about refinancing.The fees and everything will cost me $5,000.I can refinance to a 15 year loan at 2.5%.How long do I have to stay in this house to make the refinance financially beneficial assuming that the ARM stays at 3.125% for the life of the loan?

1. Consider the following problem.A company (that is highly successful and annual profit is between 3 million and 5 million) is considering purchasing two machines.Below are the costs regarding these two machines.

MachineAB

Cost of Machine$90,000$130,000

Shipping/installation costs$10,000$10,000

Annual Receipts$60,000$90,000

Annual Disbursement$20,000$35,000

Life of the machine3 years4 years

Salvage Value at end

of life$0$10,000

MARR 10%

• What are the present worths of both machines using formulas and tables.Do not combine cash flows?
• What is the best choice based upon PW using Excel?
• What is the best choice based upon FW in Excel?
• What is the best choice based upon AW in Excel?
• Comment on any additional criteria that may influence your decision?

5 b. Answer the above question, if you assume that inflation is 2% per year.